I am a UK-based business journalist and author, specializing in start-ups, fast-growth companies, corporate finance and online marketing. My career began in the late 1990s when I was appointed Business Editor of BBC World Television’s European teletext service. From there I went on to edit two magazines – e.Business and PLC Director – before going freelance in 2003, focusing, in particular, on SMEs and technology companies. Since then, my work has appeared in the national press, a broad range of magazines and online. I am the author of three books, including the Unauthorised Guide to Business the Jamie Oliver Way (Capstone), which has been translated into five languages since its publication in 2011.

Can Payday Lender Wonga's Technology Succeed In The UK Business Market?

Think “alternative finance” and these days the first thing that probably springs to mind is “crowdfunding” or its sibling “peer-to-peer lending.” For entrepreneurs in need of seed capital or growth funding, these are the solutions du jour. At least that’s what the media coverage would suggest.

But huge numbers of businesses need something much more basic than a strategic investment or a long-term loan to support growth. Sometimes, the requirement is for a few thousand pounds to make an upfront payment for stock or buy the equipment essential for completing an order. And sometimes the money is needed not in two weeks or a month, but yesterday.

And that can be a problem. Getting approval on a business loan from a mainstream bank can take several weeks or longer, and while there are plenty of specialist asset lenders and invoice discounters who will provide ‘secured’ funding, those arrangements will also take time to set up and they are, of course, predicated on the business having sufficient assets or invoices to underpin the deal.

So where to you go when you need short term cash? Well, Everline, a division of UK consumer finance company Wonga has taken the technology used to facilitate payday lending and applied it to the SME market.

Wonga – one of the highest profile companies in the UK’s burgeoning but controversial payday lending industry – originally launched a business loans service in 2012. Dubbed Wonga for Business, the operation adapted the technology used to assess and approve consumer loan applications to provide a service tailored for the requirements of business borrowers. In October of last year the operation was rebranded as Everline.

There are some parallels between Wonga’s consumer operation and the Everline service. For instance, the Everline site offers a fast application and approval system, using Wonga’s technology. It’s all done online via a relatively simple form and users can work out the costs by manipulating a set of sliders which match the sum borrowed and the repayment period to provide a figure for the interest repayable. As with the consumer model, credit worthiness checks are automated, although the checks are extended to cover the trading record of the business and history of its directors. Everline promises rapid approval or rejection and if the answer is yes, the money will be transferred to the customer within 60 minutes.

But this is very much a business product. Sums of up to £50,000 are available, with 52 weeks as the nominal repayment period. Interest rates are set at 0.5% per week (26% per annum) but businesses can choose to repay the loan more quickly to reduce interest costs.

According to Everline Managing Director Russell Gould, it’s a product that fills an important gap in the market, allowing SMEs to borrow quickly when they need to fill a hole in their short term cash flow. “We can provide an answer on the same day. If you go to a bank it might take two weeks to 70 days before you get an answer,” he says.

But is this a model that will appeal to business users? The parent company, which posted profits of £84m in its last annual statement (covering 2012), has been a hugely successful provider of short-term consumer finance, aka payday loans. But the payday lending continues to be the subject of a huge amount of criticism and scrutiny. Loans are designed to be paid back quickly but borrowers who fail to do so face rapidly mounting interest charges. Wonga’s annual interest rate is over 5,000% although the company has described this figure is irrelevant.

Everline is clearly not in the payday lending game. The loans are designed to be paid back over a maximum of a year rather than weeks and the interest rates, although on the high side, are comparable with other forms of short term finance such as cards. But for a company seeking to gain traction in the market, perception is important and Gould acknowledges that Everline faces a challenge not least in of perception. “There is a strand of opinion that says unsecured lending is not a good thing,” he says. “That is a challenge for us.”

And arguably there may be a sneaking suspicion among borrowers that the rapid application and approval process makes it too easy to access cash. However, according to Gould, while the system is designed to be user-friendly the under lying credit checks are robust. “We want to lend to good, solid companies and we carry out a broad range of checks using Wonga’s technology to make our decision,” he says. “And in our first year we didn’t have a single default.”

What the company doesn’t do is demand to know what the borrowed money will be used for. “We trust our borrowers to spend the money as they see fit, “ says Gould. This differs from normal bank practice but as Gould sees it, the role of Everline is to lend to creditworthy companies, not to make spending decisions.

Gould says that the majority of customers pay their plans off ahead of the 52 week period, reducing the cost. “What you might see is someone borrowing to buy stock and paying back the loan as that stock is sold,” he says. “On average borrowers repay the loan in 25 weeks.”

Simply building traction in the business market is also a challenge for the rebranded company but Gould says demand is rising. Everline’s last published figures showed the company lending £500,000 a month. “But that figure is growing rapidly,” says Gould.

For businesses that has been trading for two years or more, Everline is offering one solution to short term finance requirements and it provides alternative to overdrafts, credit cards, invoice finance and certain kinds of asset lending. As with all alternative finance, the key question is whether the costs and terms are aligned with the circumstances of the borrower and the ability to repay. But certainly this short-term finance model does represent another piece in the alternative finance jigsaw.

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